Incinerator Firm Blocks Its Creditors

Filing For Bankruptcy Protection Puts County Suit, Taxes On Hold

April 2, 2002|By Kevin P. Connolly, Sentinel Staff Writer

TAVARES -- Covanta Energy, the ailing owner of Lake's trash-burning incinerator, filed for bankruptcy protection in New York on Monday but pledged that its international energy and water-related ventures will "continue to operate in the normal course of business."

Bankruptcy experts said the Chapter 11 filing could delay and complicate the already lengthy and costly lawsuit Lake County filed against Covanta in October 2000 to get out of a controversial solid-waste agreement.

The county's legal bills for the case have already topped $1.5 million.

The filing puts an immediate and automatic stay on the county's lawsuit, said Miami attorney Thomas Messana, immediate past president of the Bankruptcy Bar Association of the Southern District of Florida.

"It slows them up," Messana said. "It stops it and puts the burden on the county to come into the bankruptcy court . . . and ask for relief from the bankruptcy stay."

Lake officials said Monday that they haven't determined how the filing will affect their lawsuit against the Fairfield, N.J.-based conglomerate, formerly known as Ogden Corp.

"We have no idea what the implications are at this point," County Manager Bill Neron said, adding that it's not something county officials will be able to figure out within the next few days.

The county is suing to get out of a 1988 agreement with the company that officials say has contributed to escalating solid-waste costs, including Lake's $95-per-ton disposal fee, the highest in the state.

The incinerator in Okahumpka will have cost taxpayers more than $200 million after the bonds used to finance it are paid off in 2014. However, Covanta, not the county, owns the incinerator.

All of the commissioners who approved the contract are no longer in office.

"This is the worst contract that I think is known to man that has ever been written," Commissioner Jennifer Hill said. "You put all this money into it and do all these things, then in the end you don't own it. It's a very expensive thing."

Meanwhile, Lake County Tax Collector Bob McKee said the filing prohibits him from taking action against the company for its delinquent $1 million-plus property-tax bill until after Covanta emerges from bankruptcy.

"We can't go after anybody in bankruptcy," he said. However, McKee said he would ask the bankruptcy court to include Lake as a "primary lien holder." That would help position the county to recoup the tax payments and penalties in the future.

McKee said late penalties will continue to rack up until the bill is paid. Covanta was hit with a roughly $30,000 penalty Monday for failing to pay its 2001 property-tax bill, which the company maintains is Lake County's responsibility as a "pass-through cost" under the terms of the disputed solid-waste agreement.

In the past, the county sent the company a check each year equal to the amount of the property taxes. But now, the county is refusing to pay, saying the payments essentially amount to an illegal tax break.

The property-tax dispute is part of the county suit against Covanta, which was scheduled to go to trial in November.

Messana, who is not involved in the case, said the bankruptcy will likely delay the trial. However, the filing, he said, could open up new opportunities for Lake to obtain information it has been trying to get, including details of the finances of the Okahumpka plant.

The county has been fighting to get that information to determine the operating costs and for a possible settlement.

Covanta officials described the bankruptcy filing as part of a financial restructuring plan that will protect core ventures, which include Lake's electricity-producing incinerator and 25 others around the country. The core ventures include such lucrative water projects as the $110 million desalination plant Covanta is building in the Tampa Bay area.

Covanta announced it was having serious cash-flow problems in December, saying it was hit hard by the California energy crisis and weighed down by entertainment and aviation investments that are no longer part of its core mission.

In the company's bankruptcy filing, it listed $3.28 billion in assets and $3.03 billion in liabilities as of Sept. 30.

Covanta also announced Monday that it received a $225 million infusion from a New York investment firm, Kohlberg Kravis Roberts & Co., which would acquire Covanta after it emerges from bankruptcy.

The company also said it got an additional $463 million in financing from its banks.